Capital rules may ease to raise lending

REGULATORS could lower several bank capital requirements to allow more lending and help boost the economy, top regulator Andrew Bailey said yesterday.

The boss of the Prudential Business Unit at the Financial Services Authority said the new regulatory system has two targets – primarily financial stability, but also supporting growth and jobs.

As a result, he said banks should be able to free up capital currently held against non-core assets that they will dispose of at a later date, as well as reducing requirements under the “Pillar 2” capital buffer.

“We are not against releasing existing capital to support new lending where that capital is currently tied up in non-core assets, which can either be sold or run off because they are not needed on the balance sheets of banks to support the real economy, such as trading book proprietary assets,” Bailey told the British Bankers’ Association conference.

And overall, it may even be good for the stability of banks to reduce capital buffers, as more lending would help the economy, he said.